The fire, which started at 8.45am AEDT, was fully extinguished by 1pm, while occupants in nearby buildings - including Credit Suisse in the Gateway tower in the next block - were evacuated.

The fire at the Gold Fields House demolition site in Circular Quay, Sydney. Supplied

Some people on the site were treated for minor smoke inhalation, the police said.

The outgoing owner of the site, Chinese conglomerate Dalian Wanda and earthworks company Delta Group which were overseeing the demolition did not provide a comment to The Australian Financial Review. The site is being demolished to make way for the twin apartment and hotel tower known as One Circular Quay.

"The Circular Quay site remains under the management of Wanda, as the transfer process continues," a Yuhu spokesman said.

"As a developer, we expect the highest standards of workplace safety."

Part payment for the sale is due on March 15.

It appears the fire started at the top of the scaffolding of the building. Supplied

Police say the remains of the building, which was undergoing demolition, sustained significant damage.

"Officers attached to Sydney City Local Area Command will investigate the circumstances surrounding the blaze. It is not known if there are any suspicious circumstances; inquiries are continuing," police reports say.

The fire, however, looked "unusual" due to the size of the blaze which was seen from the Sydney Harbour Bridge, and the timing of the blaze, construction sources said.

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"This is not normal," a developer with similar construction projects said.

The fire engulfed the building in Circular Quay. Supplied

"Usually at this stage of the demolition program, services would have been decommissioned and a big site tidy up would have happened."

A commercial building, unlike a residential one, would have less fire-prone materials such as gas pipes that could cause a fire of this size, he added.